QUOTE AND NEWS
Market Intelligence Center  6 hrs ago  Comment 
For a hedged play on Johnson Controls Inc. (JCI) MarketIntelligenceCenter.com’s patented trade-picking algorithms selected a Jul. '15 $50.00 covered call for a net debit in the $47.29 area. That is also the break-even stock price for the covered...
Motley Fool  Mar 25  Comment 
This industrial company has heart -- and a bright future.
Forbes  Mar 23  Comment 
Shareholders of Johnson Controls Inc (NYSE: JCI) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2016 covered call at the $52.50 strike and collect the premium based on the $2.95 bid, which...
Automotive World  Mar 11  Comment 
Automotive supplier recognized for top performance for the fifth time Johnson Controls has been honored with two awards from General Motors – the 2014 General Motors Supplier of the Year Award and the Overdrive Award. This is the fifth time...
Wall Street Journal  Mar 6  Comment 
CBRE Group., the world’s largest commercial real-estate services company, is negotiating to buy the division of Johnson Controls Inc. that manages 1.8 billion square feet of corporate real estate globally.
Reuters  Mar 5  Comment 
CBRE Group Inc, the world's largest commercial real estate services firm, is in talks to acquire Johnson Controls Inc's global workplace solutions business for more than $1...
Automotive World  Mar 4  Comment 
Partnership successfully develops a next generation front seat structure Johnson Controls has been awarded a top honor by Toyota Motor Corp. for promoting the automaker’s Toyota New Global Architecture (TNGA), which is considered a structural...
Forbes  Mar 2  Comment 
Looking at the universe of stocks we cover at Dividend Channel, on 3/4/15, Johnson Controls Inc (NYSE: JCI), Genuine Parts Co. (NYSE: GPC), and Gannett Co Inc (NYSE: GCI) will all trade ex-dividend for their respective upcoming dividends. Johnson...
Market Intelligence Center  Feb 18  Comment 
Johnson Controls Inc. (JCI) presents a trading opportunity that offers a 4.06% return in just 58 days. A covered call on Johnson Controls at the $50.00 level expiring on Apr. '15 offers an assigned return rate of 4.06% or 25.54% annualized. This...
Market Intelligence Center  Feb 9  Comment 
Friday’s trading in Johnson Controls Inc. (JCI) gives options traders an opportunity for a 12.78% return. By selling the Apr. '15 $50.00 call and buying the Jan. '16 call at the $35.00 level for a net debit of $13.30, traders will book a profit...




 

Johnson Controls (NYSE: JCI) makes car interiors and heating, ventilation, and air conditioning (HVAC) products. The company's car parts business is shrinking with the overall US automotive business (the company's automobile sales fell 34% in 2009). Although Johnson Control's automobile components sales generated 42% of 2009 total revenues, the segment lost the company $541 million for the year.

The company is relying heavily on its Building Efficiency and Power Solutions segment, both of which generated the about same amount of segment income at $400 million.

Johnson Controls is one of the few companies, other than energy companies, that is benefiting from higher electricity prices. US electricity prices increased an average of $0.31 per kilowatt hour in 2009, and higher electricity costs encourage building managers to replace their heating and air-conditioning systems with newer, more energy-efficient equipment.

Company Overview

Business Segments[1]

  • Automotive Experience (42% of net revenue): designs and manufactures automotive interiors for automobile companies such as Ford Motor Company (F), General Motors (GM) and Daimler AG (DAI). The company's Automotive Experience products include seats, instrument panels, information displays, headliners and doors. Johnson Control's Automotive Experience revenues decreased 34% in 2009, mainly due to a decrease in sales to the American big three automakers. Although the segment generates a large portion of the company's net revenue, its segment income was -$541 million.
  • Building Efficiency (43% of net revenue): makes heating, ventilation, and air conditioning (HVAC) equipment for commercial buildings. In addition to manufacturing HVAC products, Building Efficiency offers services such as energy efficiency consulting and on site maintenance and property management. The segment's income was $397 million.
  • Power Solutions (14% of net revenue): produces lead-acid automobile batteries. The company sells most of its automobile batteries to aftermarket purchasers through retail outlets like Pep Boys-Manny, Moe & Jack (PBY) and Wal-Mart Stores (WMT). The company also sells batteries to automobile manufacturers. Power Solutions also manufactures absorbent glass matt (AGM), nickel-metal-hydride and lithium-ion batteries that power hybrid vehicles. Although Power Solutions is Johnson Controls' smallest segment, it is the most profitable contributing $406 million in segment income.

Business Growth

FY 2009 (ended September 30, 2009)[2]

  • The company incurred a net loss of $338 million for the period, compared to a get of $979 million in the previous year.
  • Net sales fell 25% to $28.5 billion. Sales fell in all of the company's segments with the automotive (-34%) and power segments (-31%) being hit the hardest.
  • Sales in the Automotive segment fell by more than 25% in all three of the company's geographic regions, with North America suffering the largest loss (-31%).

Trends and Forces

Decreased automobile sales result in decreased sales of Johnson Controls' automobile interiors

In 2009 U.S. sales of automobiles fell to 10.4 million new cars, making it the worst year in terms of car sales in 27 years.[3] The economic slowdown and the instability of the Big Three Automakers is making is more difficult for people to buy cars. When consumers purchase fewer cars, automobile companies buy less interior products from companies like Johnson Controls as they decrease production to meet lowered demand. Despite attempting to minimize the effects of decreased automobile demand by negotiating contracts, Johnson Controls' Automotive Experience revenues decreased by $6 billion dollars between 2008 and 2009.[2]

Exchange Rates resulting in a weak dollar boost Johnson Controls' International Revenue

Because Johnson Controls reports their revenues in U.S. dollars but does 52% of their business outside of North America, it is exposed to fluctuations in exchange rates. If foreign currencies appreciate, the dollar value of Johnson Controls' international revenues increases. [4] In 2009, the unfavorable impact of foreign currency translation was -$2.1 billion.

Competitors

  • Ingersoll-Rand Company (IR) supplies its customers with climate control, industrial, and security products and services. The company's climate control operations, including Trane, compete with Johnson Controls' Building Efficiency products and services.
  • Siemens AG (SI) offers it's customers products and services based on its expertise in electrical engineering. Siemens competes directly with Johnson Controls' Building Efficiency products and services through its Siemens Building Technologies brand.
  • Honeywell International (HON) provides customers with products and services including aerospace products, building products and services, turbochargers, and chemicals. The company's building products and services compete directly with Johnson Control's Building Efficiency segment.
  • United Technologies (UTX) provides technology driven products and services to the building systems and aerospace industries. The company also owns the Carrier Corporation, which competes directly with Johnson Controls' Building Efficiency operations.
  • Lear (LEA) provides automobile manufacturers with seats and electrical distribution systems. The company's seats compete with the seats offered by Johnson Controls' Automotive Experience segment.
  • Magna International (MGA) designs and manufactures automotive assemblies, modules and components such as seats, interiors, metal body systems and metal chassis systems. The company's seats and interiors compete with those produced by Johnson Controls' Automotive Experience segment.

References

  1. JCI 2009 10-K pg. 2-3 and 22-23
  2. 2.0 2.1 JCI 2009 10-K pg. 19
  3. The Truth About Cars "U.S. Car Sales In 2009: Worst in 27 Years" 5 January 2010
  4. JCI 2009 10-K pg. 6
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